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I wanted to ask about question 6 in chapter 16 and question 4 in chapter 17 in the notes provided.
Can you please explain how the refund recieved from supplier is on the credit side in payables?
Also in question 4 how come the answer says that we should increase the inventory by 1500? Since we only got half of the inventory back how can we say 1500 instead of 750?Thanks
If i may add another question here.regarding chapter 18 and question number 3. I thought the answer should be B instead of D. it says that the closing inventory was overstated. so once we take that into account and correct the error shouldnt the profit be less rather than more?
Thanks in advance for answering and really appreciate your effortsHave you watched the lectures? I explain about refunds in the lectures (and there is no point in using the notes without the lectures – they are lecture notes and it is in the lectures that we expand and explain on the notes).
Refunds are simply a repayment of cash already paid (maybe, for example, we paid the supplier too much and so he repays us.)
When we pay the supplier we Dr Payables Cr Cash.
If the supplier gives the money back then we do the reverse – we Dr Cash and Cr Payables.Again – if you watch the lectures then I explain about sale and return!
As at the year end of 31 October, the customer had not said he was accepting the goods. Therefore at 31 October we have not sold anything and therefore we should not record any sale and we should include all of the goods in our inventory.
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